Thursday, October 9, 2008

Expert warning the risk of buying US financial equities

Chinese financial institutions must be very cautious when they are considering the possibility of investing in the developed market amid the global financial crisis, warns a Chinese expert in an interview with People's Daily Online on Oct. 8.

Chen Baosen, a research fellow of the Chinese Academy of Social Sciences, said that it may not be the right time for Chinese money to get in Wall Street where banks were struggling for survival.

He gives two reasons for the prudence. Firstly, the situation of the US financial market is currently too complicated to make judements. Secondly, Chinese financial institutions are still not well prepared enough in terms of management and supervision. They don't have enough right persons to do those things.

"Don't be haste to take the risks," he said.

Chen also stresses that the national interest should be the most important factor of China's any decision on whether it would buy the US treasury bonds.

By People's Daily Online

China ranks among the world’s top 30 economies

The Global Competitiveness Report 2008-2009 released by World Economic Forum on Oct 8 shows that China is now among the world’s top 30 economy, up by 4 positions from the previous, continuing to lead the growing economies of Brazil, Russia, India as well China, collectively known as BRIC.

The Report was released by the Geneva-based WEF on Oct. 8. The Institute of Economic Structure and Management under National Development and Reform Commission and Research Centre , and Centre for China Economy and Statistics under Tianjin University of Finance and Economics published the report simultaneously.

The Report says China has achieved brilliant results in terms of economic development and plurality, and made remarkable progress in the aspects of poverty alleviation and improvement of people’s life since the late 1970s. China, which is becoming more and more influential in global economy, is now the world’s fourth largest economic entity, following the US, Japan and Germany.

The Report shows India has dropped to the 50th from previous 48th, while Russia gained the 51st rank from previous 58th, and Brazil edged to the 64th from previous 72nd.

The world’s top ten with regard to economic competitiveness are the US, Switzerland, Denmark, Sweden, Singapore, Finland, Germany, the Netherlands, Japan and Canada. The economies in Asia that have surpassed China’s are Singapore, Japan, HKSAR, ROK, Taiwan, Malaysia, Qatar and Saudi Arabia.

By People's Daily Online

China looks to curb SOE losses through staff ownership

China's state assets watchdog is set to ban state-owned enterprise employees, particularly management staff, from owning shares in SOE affiliates and subsidiaries, in a move seen as an attempt to stop state assets ending up in private hands.

The measure was a crackdown on speculation by SOE management on SOE reform, through irregularities in management buyouts, and would prevent losses of state assets, Zuo Daguang, director of the watchdog's Liaoning branch, told Xinhua on Thursday.

"Staff, particularly middle and senior management, are forbidden to invest in companies that provide the SOEs with fuel, raw and auxiliary materials, equipment and spare parts," said the State-owned Assets Supervision and Management Commission .

The prohibition extended to companies that provided design, construction, maintenance, sales and intermediary services for SOEs.

Staff investment is also banned in companies involved in business similar to that of the SOEs, according to the proposals on regulating SOE employees' shareholding and investment, published by SASAC on Wednesday.

The SASAC also highlighted in the new rules that the SOE staff could in principle only hold equities of their own companies, not subsidiaries or other SOE-invested businesses.

The regulations did not apply to listed companies mainly held by the State.

In order to contain insider-control and state-owned assets losses, SASAC and the Ministry of Finance jointly issued a document in April 2005, forbidding management boyouts of large SOEs.

SOE management ownership of equities in affiliates, subsidiaries and SOE-invested companies has led to problems, such as executives procuring products or services of those businesses at prices unreasonably higher than the market price, resulting in "state-owned assets losses in disguise", said Zuo Daguang.

Public discontent with state assets losses and privatization has been in rumbling on since the SOE reforms were launched three decades ago.

Last March, the SASAC issued similar proposals specifically designed to regulate employee shareholdings in power generating SOEs. The proposals said such SOEs were to be the first to buy shares transferred by their staff.

But uncertainties over the enforcement of the regulations and the definition of senior and middle management could continue to puzzle state assets supervisors, said a SASAC research center expert who declined to be named.

According to the new document, SOE senior and middle management are required to transfer such shares or resign from the posts within a year of the publication of the new rules, but the new rules prescribe no penalties for failing to comply.

The proposals encouraged employees of small and medium-sized SOEs to own shares of the SOEs, a move that has been contemplated for more than a decade to help smaller firms out of debt and push them into competition.

But they stipulate that employee stakes in large SOEs should be minority shareholdings to maintain their nature of state ownership. Large SOEs, particularly the 147 giants reporting to the central government, include industries crucial to state security and national economy, including petroleum and petrochemical, power and telecommunications.

Source: Xinhua

Australian PM says China's growth strategy to continue

Australian Prime Minister Kevin Rudd said here on Thursday he believed Chinese economic growth - which has helped underpin the Australian economy - would continue over the longer term.

Rudd told a press conference that he had spoken to Chinese Premier Wen Jiabao in recent days and been reassured of the continuing strength in the Chinese economy.

"I note in particular a decision taken by China to reduce its interest rates by 27 basis points. This is important in terms of indicating China's long-term growth strategy," he told reporters today.

China cut its key interest rate by 27 basis points on Wednesday in a bid to shore up the economy in the midst of the global financial crisis.

"Following a conversation I had with Prime Minister Wen Jiabao ... it would appear to me to be confirming that China intends long term to accelerate its growth strategy into the future," Rudd said.

While China was marginally revising down its growth rate, Rudd said actions and statements from Beijing suggested China would "continue to accelerate the growth lever for itself".

Source: Xinhua

Chinese bank issues Platinum Card in Singapore

Bank of China , one of the largest banks in China, and China Unionpay , the only National Bankcard Association in China, jointly unveiled the BOC Great Wall CUP Platinum Card following both sides inked a global partnership agreement on Thursday.

Speaking at the launch ceremony, which was attended by some 100people from Singapore and China, Yue Yi, Global Head of Consumer Banking of BOC Head Office, said that with the strengthening of economic and trade ties between China and Singapore, coupled with the recently concluded Beijing Olympics 2008, there is renewed interest amongst Singaporeans of all business groups and ages to visit China.

Xu Luode, president of CUP, also said that the signing of the global partnership agreement and launch of the Great Wall CUP Platinum Card enhance the overseas card business collaboration for both parties.

"We believe that this card will provide a greater ease of payment convenience to Singaporeans who travel frequently to China for business or leisure as well as setting the benchmark for the expansion of CUP card in the global card business," he said.

This is the first Singapore dollar denominated CUP Credit Card to be launched in Singapore and will provide recognition and convenience of card payments, with associated discounts and privileges, for the thousands of travelers and businessmen who travel frequently to the Chinese mainland, Hong Kong and Macau.

The Great Wall CUP Platinum Card is the passport to the wide payment networks throughout China with 1.45 million merchant terminals and easy access to cash withdrawals at over 148,000 ATMs.In addition, card members will enjoy exclusive privileges at more than 17,000 merchants in the Chinese Mainland, Hong Kong and Macauwhen they dine, shop, entertain and travel.

Source: Xinhua

Hong Kong stocks rebound 3.31% on concerted rate cuts

Hong Kong stocks rebounded 3.31 percent Thursday on concerted emergency rate cuts earlier by central banks of major economies, although there were still uncertainties on the market as investors largely remained shy.

The benchmark Hang Seng Index ignored moderate overnight losses on Wall Street to open up 1.08 percent at 15,598.24 on Thursday and gradually widened its gains to 511.51 as it closed at 15,943. 24, just dozens of points away from the 16,000 mark.

The index moved between 15,990.20 and 15,550.86, with market turnover totaling 60.87 billion HK dollars , lower than Wednesday's 77.78 billion HK dollars but not too bad for the current time of turmoil.

Forty of the total 42 blue chip stocks turned out gainers, with heavyweight HSBC Holdings advancing 2.2 HK dollars, or 1.9 percent, at 118 HK dollars, and its local unit Hang Seng Bank surging 3.97 percent to finish at 117.9 HK dollars.

Mainland lender ICBC surged 6.58 percent to 4.05 HK dollars, and China Mobile, another market heavyweight and by far the largest carrier on the mainland, added 2.9 HK dollars, or 4.36 percent, to close at 69.4 HK dollars.

Analysts attributed the gains to the emergency rate cuts announced after the close of Hong Kong market Wednesday by central banks of major economies such as the United States, the United Kingdom, the Eurozone, Canada, Sweden, Switzerland and China.

It was "unprecedented" for the central banks to cut rates together, they said.

The Hong Kong Monetary Authority also followed the U.S. Federal Reserve to cut the base interest by 50 basis points. The actual rate cuts amounted to 150 basis points, as there was also a 100 basis point cut resulting from a methodology change.

But most of the local banks, including the Standard Chartered, chose not to slash their mortgage lending rates because of high interbank lending rates.

The commerce and industry index gained the most among the four major categories with an increase of 3.87 percent, followed by 3. 49 percent for the financial sector. The properties genre ended up1.29 percent and the utilities gained 1.67 percent.

Cheung Kong, the real estate conglomerate headed by "superman" Li Ka-shing, gained 1.31 percent at 73.45 HK dollars. SHK Properties, one of the leading residential developers in Hong Kong, closed up 0.3 percent at 66.2 HK dollars.

Mainland-based lender Bank of China finished up 5.41 percent at2.73 HK dollars. Ping An, the insurance group, added 3.87 percent at 41.6 HK dollars.

China Unicom surged 9.27 percent to 9.9 HK dollars.

Two oil shares also recovered part of the ground lost on the previous day, with PetroChina adding 3.07 percent at 6.37 HK dollars and Sinopec up 7.35 percent at 5.26 HK dollars. CNOOC, the offshore oil producer, remained unchanged at 6.5 HK dollars.

Shipping stock China COSCO was up 0.79 percent at 5.1 HK dollars, but the gain was far less than its 20.06 percent loss on Wednesday.

Source: Xinhua

China approves six small enterpirses to issue short-term bonds

Six Chinese enterprises have been approved to issue short-term bonds amid a pilot program among the country's small- and mid-sized companies.

Six firms that run machinery and electronic businesses have been approved to issue short-term bonds worth 252 million yuan with maturities of less than one year on the inter-bank market. About 197 million yuan of bonds would be issued in the first phase, sources with the National Association of Financial Market Institutional Investor said on Thursday at a press conference here.

China's central bank gave the nod for eligible enterprises to sell short-term bonds in 2005 to widen financing channels.

To develop the country's capital market and broaden direct financing channels to curb enterprise's heavy reliance on bank credit, the central bank announced in April non-financial companies could issue such bonds without its approval from April 15.

Since the green light was given in 2005, only large state-owned enterprises gained such a right. Very few small enterprises enjoyed the same right.

The pilot program among small- and mid-sized companies was vital to help the cash-strapped small-scale business out of their difficulties and diversify the credit products in the inter-bank market, said Shi Wenzhao, NAFMII general secretary.

But experts said the popularization of the program demanded a more transparent market and greater policy support.

Shi said many small- and mid-sized companies lacked sound corporate governance and their information release was not transparent enough, which posed bigger risk than that of the large enterprises.

He also called for the establishment of a national credit guarantee system for small- and mid-sized businesses since it was a precondition for their financing activities.

He said more investors should be allowed to engage in the short-term bonds market.

Through 2007, 316 companies issued 769.3 billion yuan of short-term bonds, with 320.3 billion yuan of outstanding debt, statistics showed.

In comparison, short-term loans to non-financial companies and other institutions surged 1.25 trillion yuan in 2007, while middle- and long-term loans jumped 1.65 trillion yuan.

Source: Xinhua